Plans are underway at General Electric to cut the number of employees as the conglomerate makes an effort to reduce costs and increase profits just as the new chief executive officer, John Flannery, starts to settle in. Additionally in various technology positions, hiring has been halted.
According to sources Flannery has informed senior executives to make preparations for downsizing at the corporate headquarters as well as other business areas which produce neither profit nor revenue. At the moment it is not clear what number of jobs stand to be eliminated. Earlier in the year General Electric had revealed that there were plans to reduce costs.
“We have a plan to take out $2 billion in cost by the end of 2018. We’ve said John is reviewing all aspects of the company. He will present to investors in November,” a spokeswoman for General Electric, Jennifer Erickson, said.
Sources further indicated that though November had been set as the month a cost-reduction plan would be presented to investors, Flannery would not wait until that time.
According to analysts it will be necessary for General Electric to reduce spending by over $2 billion since there is an increase in capital outlays in other areas including the digital business. The conglomerate is also changing the strategy and financial targets for the Predix industrial system and GE Digital in a bid to boost sales. Under the former chief executive officer, Jeff Immelt, cashflow and profit at General Electric disappointed investors resulting in the stock falling 23% this calendar year.
The cost-reduction target of $2 billion had been set in March following talks between Nelson Peltz, an activist investor and the leaders of the conglomerate. Peltz’s Trian Fund Management has a stake in General Electric worth around $2 billion.
Reduction in the corporate overhead will mean limiting the size and scale of the conglomerate’s new headquarters in Boston, Massachusetts. Earlier last month General Electric had indicated that construction of a part of the headquarters would be delayed in order to generate savings. The departments that are likely to be affected by job cuts include finance, auditing, procurement, jet and helicopter operations, corporate security, recruiting and human resources.
Sources also indicate that the information technology department is likely to be affected by the downsizing and currently there is a hiring freeze in this department. Employees working in digital sales and on Predix will be spared, however.